Credit Card
The
Credit Card is plastic credit card with a magnetic strip issued by a bank or financial institution. Holders of a
valid credit card have the authorization to purchase goods and services up to a predetermined amount, called a credit limit.
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| Explain Advantages and Disadvantages of Credit Cards |
The vendor receives essential credit card information from the cardholder, the bank issuing the card actually repays the vendor, and eventually the cardholder repays the bank through regular monthly payments. If the entire balance is not paid in full, the credit card issuer can legally charge interest fees on the unpaid portion.
Benefits of Credit Cards to customers
1. Convenience
The main benefit to each customer is convenience as carrying a credit card eliminates the need to carry any cash for most purposes.
2. Credit card allows small short-term loans
Compared to debit cards and checks, a credit card allows small short-term loans to be quickly made to a customer who need not calculate a balance remaining before every transaction, provided the total charges do not exceed the maximum credit line for the card.
3. More fraud protection than debit cards
Credit cards also provide more fraud protection than debit cards. In the UK for example, the bank is jointly liable with the merchant for purchases of defective products over £100.
4. Rewards and benefits packages
Many credit cards offer rewards and benefits packages, such as offering enhanced product warranties at no cost and free loss/damage coverage on new purchases.
Drawbacks of Credit Cards
Compel you to spend more
Credit cards give you the purchasing freedom so they can compel you to spend more than what your budget would allow.
Prone to security issues
Credit cards are prone to security issues, especially when it comes to online transactions. This can be avoided by doing business with websites that employ a secured socket layer (SSL), however.
Interest Rates and Other Applicable Fee
Credit cards impose interest rates and other applicable fees.
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